Core Viewpoint - The convertible bond market is experiencing a marginal improvement in supply and demand dynamics, leading to a downward trend in valuation centrality as the number of early redemptions decreases and issuance increases [1][3][4]. Group 1: Market Dynamics - The central valuation of convertible bonds has declined since mid-March when the China Securities Convertible Bond Index reached a nearly 10-year high [3]. - The median price of convertible bonds has dropped from above 120 yuan to below 120 yuan, with the index showing a cumulative decline of nearly 4% since its peak [3][4]. - The increase in issuance of convertible bonds, with 12 bonds issued this year totaling 170.96 billion yuan, has alleviated previous supply-demand imbalances [3][4]. Group 2: Factors Influencing Valuation - The easing of supply-demand conflicts is attributed to increased issuance and a reduction in the number of early redemptions, particularly after a peak in March and April [3][4]. - Market analysts suggest that the previous high valuations were driven by scarcity premiums due to supply-demand imbalances, and the market is now returning to a more rational valuation [4]. Group 3: Investor Behavior and Risks - Investors are currently focused on avoiding performance risks, especially with the upcoming 2024 financial reports and the implementation of new regulations [6][10]. - The market is likely to favor fundamental performance over growth expectations, with potential downgrades in ratings for certain convertible bonds following the financial disclosures [6][10]. - The risk of performance-related declines in stock prices is significant, as convertible bond prices are closely tied to the underlying stock performance [7][10]. Group 4: Investment Strategies - Institutions recommend focusing on structural opportunities, particularly in sectors benefiting from domestic demand, high dividends, and self-sufficiency [10]. - Investors are advised to prioritize convertible bonds from companies with strong operational fundamentals and to diversify investments to mitigate risks associated with poor performance [8][10].